The UK average working households are only 19 days from financial crisis if they were to lose their jobs, a recent study by Legal & General has found.
The Deadline to Breadline report found UK households’ financial resilience has shrunk by 21% since 2020. The amount of time households can fund basic expenses decrease to 19 days from 24 days in April 2020.
Households have average savings of £2,431 and debts of £610. Accounting for average daily expenses of £93, this would see the average household run out of money in less than three weeks if they were to lose their income.
The research also found that most people underestimate how long their money would last, assuming they would have 60 days of breathing room were they to lose their job.
With household costs increasing significantly, and more businesses under pressure, this has raised concerns that many people across the country could be especially vulnerable to financial shocks should the worst happen.
Household energy bills, for instance increased by 54% in April 2022, a record increase, and are likely to rise substantially again in October and the New Year.
Last Friday, the energy regulator Ofgem announced that the average UK household energy bill is now forecast to hit £3,549 from October, an 80% rise on the current price cap of £1,971.
The L&G report said households are cutting back on spending on both essentials (69%) and luxuries (81%). nd that nearly 2 million adults have no money left each month after spending on essential items, this is a rise of 330,000 in the last two years.
The report also highlights the plight of the UK’s poorest workers, those earning under £20,000 a year. It said about 5 million people in the UK are living pay-cheque-to-pay-cheque and the average household in this group has no safety net should the worst happen.
The study also found that older workers in the UK (55 to 65 years old) tend to have higher levels of financial reserves they can draw on, meeting their expenses for an average of 99 days in the event they lose their income.
However, these households are also the most likely to overestimate their safety net, assuming they can manage for at least 180 days.
This raise concerns as older households have less time to build their savings back up before retirement and typically find it harder to find new roles following redundancy.
Legal & General Retail chief executive Bernie Hickman says: “Our latest research presents a challenging picture for working households across the UK. We often talk about managing money month-to-month but, as our findings indicate, for some it’s a case of day-by-day.
“The cost-of-living crisis is squeezing the purses of people all over the country, leaving households of every shape and size with money worries. The fact is there is only so much people can do to manage their budgets in these difficult times but there are resources available that can help.
“Half of all people in the UK (52%) haven’t taken advantage of financial guidance available, including free services like MoneyHelper, to help make the most of what they have. It may feel overwhelming, but we encourage people to do what they can now, so they are best prepared for a further squeeze on finances coming this autumn.”
Another recent study by Legal & General Rebuilding Britain Index also found that the cost-of-living crisis is increasing inequalities between different parts of the country, disproportionately affecting households in areas where there is a greater need for levelling-up initiatives.
